Sunday, November 2, 2008

"Building Out of Economic Chaos"

NOTE: We've moved! Visit us at the California High Speed Rail Blog.

The Washington Independent, an online news source, has been running a 3-part series on a new economic stimulus package being considered in Congress and one of their entries is Building Out of Economic Chaos, making the point that infrastructure stimulus is a necessary part of getting this country back on its feet.

Democratic leaders appear more and more confident they can win the fight over a large stimulus bill. Infrastructure funding — which could replace thousands of local jobs lost in the downturn — seems increasingly to be driving the debate.

“There is a backlog,” said Rep. James Oberstar (D-Minn.), chairman of the Transportation and Infrastructure Committee. “There is a demand. There is a hunger. There is a need to invest. Our cities are crying out.”

The lame-duck Bush Administration, composed of new Hoovers, blocked a House infrastructure spending bill in September. But Democrats are going to try again, riding the wave of a successful November election and armed with arguments that undermine the deniers:

“Infrastructure spending is never an effective means to create rapid stimulus,” the White House proclaimed in its veto threat.

Yet many state and local officials argue that a great number of projects could begin almost immediately. Corzine, for example, said that New Jersey has roughly $1.5 billion in projects ready to start within 90 days. Jerry E. Abramson, mayor of Louisville, said the city has $250 million in unfunded infrastructure initiatives set to go within 120 days. Nationwide, state transportation departments have more than 3,000 projects, totaling $17.9 billion, ready to launch within 90 days, according to a survey conducted by the American Assn. of State Highway and Transportation Officials.

In addition, many economists say the current recession will last long enough that the timeline criticism is irrelevant. “That argument has no force now,” Paul Krugman, the Nobel prize-winning economist, wrote in his Oct. 16 New York Times column, “since the chances that this slump will be over anytime soon are virtually nil. So let’s get those projects rolling.”

On that theme, economists point out that labor markets rebound from economic slumps far more slowly than other indicators. During the recession of 2001, for example, it took 30 months for unemployment to bottom out, according to John Irons, policy director at the Economic Policy Institute. Four years passed before employment rates rose above pre-recession levels, he added.

California High Speed Rail is just such a project that could begin very quickly with federal stimulus. Of course, we will not receive that money unless we pass Proposition 1A.

California has a clear choice on Tuesday. Either we slide deeper into recession and abandon tried and true solutions to revive our economy, or we pass Prop 1A and start the long road back to prosperity.

Your choice, California.


Anonymous said...

As pointed out in other places, the only real very near term economic effect on California will be the $200 that is going to taken from the general fund for next years operation of the CHSRA, if Prop 1A passes.

Near term there will be no construction jobs. Only near term jobs will be engineering jobs, mostly outsourced to foreign entities, France, Germany, Japan, where expertise for a project like this is centered.

Funny how you advocates have really shifted gears, and no longer talking about transportation, but about job creation. Must be a result of the more then $200 K the the Alliance for Jobs is putting into the radio campaign.

Bad message for many --- too late to do much good or harm.

BruceMcF said...

Only the most blinkered ideologue would expect that employment will boom as soon as the current recession is over ... and the current recession shows every sign of hanging around for a while ...

... since in the last two recessions, unemployment peaked about two years after the recession hit bottom and GDP began to recover.

So the charge that it may take more than three months for for the first wave of employment benefits to hit is neither fish nor fowl nor red meat, or in other words, red herring.

"Funny how you advocated have really shifted gears and no longer talking about transportation", precisely one day after the Saturday post talked about the substantial transportation benefits that HSR will provide for the Central Valley seems to be a case of "say it and hope people beleive it, don't worry too much whether it's true or a lie".

yes on 1a said...

This is a project that will last for hundres of years!!WAKE UP and start planning for the next 30 years not 30months! and where do you get the figure of 200 million from?

Rafael said...

I believe that new housing starts will remain anaemic in California for many years because there are so many distressed properties on the market as a result of the foreclosure crisis - which is far from over.

That means the construction sector will need a series of public works projects to tide its workforce over so they can keep paying their mortgages and avoid having to claim unemployment benefits.

The state has a large number of projects already in construction or advanced stages of planning: levees for the Delta, roads, subways in LA and SJ, light rail in multiple cities, a power line & a new airport terminal in San Diego etc.

HSR would be added to that list but because it was twice delayed and the Authority temporarily starved of resources, it is not ready to break ground immediately. While it's true that there will still be a need for public works for a couple of years after the recession bottoms out, Washington will not be in a mood to engage in deficit spending at that point. It is now, so the state and the California delegation will have to get creative to get their fair share of the stimulus package now and still make HSR happen.

I usually don't quote myself, but perhaps the following suggestion got lost in the previous thread:

"If there is a second stimulus package, as suggested by Fed chairman Bernanke, it might be on the order of $150 billion. California's share of that might be on the order of $15-$20 billion, so the state could choose to use that for road projects authorized by prop 1B(2006). A stimulus has to create jobs right away to have the desired effect - HSR won't break ground for another three years. However, some legal construct would have to be found to re-allocate the unused portion of prop 1B(2006) bond authority to the HSR project. In effect, the Feds would pay for the roads and California for 2/3 of the trains. As long as the state's total debt burden of the two measures combined remains unchanged, that should be ok.

However, California may not be at liberty to execute this switcheroo if prop 5(2008) goes down in defeat. In that case, there will likely be a Federal court order to spend $8 billion to alleviate overcrowding, i.e. to build more prisons. The prison guards union is funding the No on prop 5 effort. Ergo, if you want your potholes fixes and HSR built, vote yes on prop 1A and also on prop 5."

Rafael said...

@ yes on 1A -

God I hope construction won't take that long! We're talking about a railroad, not the Sagrada Familia.

Ironically, that particular sacred building site actually held up the completion of the Madrid-Barcelona AVE line for quite some time.

Anonymous said...

Refuting most of the arguments being made by the proponents of Prop 1A, here is High Speed Rail, The wrong Road for America -- out just in time before Nov 4th.

Not wanting to get into trouble with Robert, I won't even quote the summary, but its worth reading

@ yes on 1a

The figure of $200,000,000 came directly from the State Senate Transportation and Housing committee.

Anonymous said...

However, California may not be at liberty to execute this switcheroo if prop 5(2008) goes down in defeat. In that case, there will likely be a Federal court order to spend $8 billion to alleviate overcrowding, i.e. to build more prisons. The prison guards union is funding the No on prop 5 effort. Ergo, if you want your potholes fixes and HSR built, vote yes on prop 1A and also on prop 5."

Yeah, or stop locking up people for minor drug related crimes. is another name for You can create as many shell think tanks as you like, but it's still a bunch of old men with lipstick on.

Tony D. said...

You're wasting your time anon 1:26 with that Cato Inst. bull crap. Who the hell's going to read it anyway? Besides the regular naysayers (like yourself) and the far-right? I'm sure you have a plan to have copies at every polling place throughout California on Tuesday; I could sure use it for toilet paper.

yes on1a said...

More right wing lies..GOD there REALLY scared that this project is going to change this oilbased life!
A NEW generation is here and you will see after Tuesday

Robert Cruickshank said...

A quick glance at that Cato study shows it's full of the usual lies about HSR - in this case they're using truthiness to suggest that since no other train in America goes faster than 135 mph, ours won't either. Idiocy.

However, we have better things to do these last two days than worry about the Cato Institute.

Brandon in San Diego said...

Cato is too little too late.

The fact that it was released so close to November 4th means only that their argument carries no merit and they are hoping that the peak reception in the first couple-few days of its release would resonate with folks. Posters here are smarter than that.

If they gave it a few more days, maybe released in September, the paper woud likley be laughed at across many more spectrums.

As for the blog post, Adrian Brandt from the Yahoo HSR support forum forwarded an article via email indicating that Pro-HSR campaign had $2 million! If true, where is that being spent?

Anyone else get that email?

Rafael said...

Just look at the title the Cato Institute chose for their study: even their metaphor is stuck in the 20th century.

Let's examine the arguments in their executive summary one by one:

* HSR will not take cars off the roads.

When your population grows from 38 million to 55 million in 33 years, the total number of cars at the end of that period will not be lower than at the beginning. In particular, commercial vehicle fleet will grow unless there is a separate effort to shift freight to rail and inland waterways.

However, HSR will mean Californians can reduce the annual mileage on their passenger cars and trucks, especially for trips up and down the Central Valley and between the San Bernardino and LA county.

Some will use a combination of transit or electric bicycles and HSR to avoid having to own a second or third car.

All of these options will be especially valuable if gasoline prices reach a collective pain threshold again.

* HSR will replace private commuter airlines.

That's an overstatement, but HSR systems have won significant market share against short-haul flights in the same corridors all over the world and, that's a Good Thing (tm). Eliminating low-margin short-hop flights frees up scarce take-off and landing slots for more profitable and quite fuel-efficient long-haul flights. That eliminates pressure to build new runways.

Note that even Southwest did not spend any money campaigning against California HSR. Besides, CHSRA will put operations out to tender and has said it would welcome bids from airlines. The Virgin group operates intercity trains along the West Coast Line in the UK and Air France is gearing up to compete on the Paris-London route when the EU liberalizes rail traffic in 2010.

* HSR operations will have to be heavily subsidized.

True, but only in the narrow sense that fare box receipts will not support both recurring costs and debt service. However, HSR systems all over the world are self-funding after the initial public investment into building a starter line - that's precisely why HSR is so popular with governments!

Also: motorists and airlines aren't paying the full cost of highway/runway construction and air pollution/GHG emissions, either - not to mention the military spending needed to maintain stability in the Persian Gulf and keep the oil flowing. All transportation systems have a socialized component.

* HSR will increase air pollution.

This is nonsense in that electricity is generated at a small number of point sources that are much easier to clean up than millions of car exhausts and jet engines. HSR will cause significant greenhouse gas emissions if the electricity is produced using coal, but CHSRA has decided that renewable electricity is feasible.

* HSR will reduce aggregate GHG emissions by just 0.7-1.5%, depending on ridership.

Yes, but this is a fringe benefit of the system, not its primary purpose. There isn't really any single action that will make a really big dent in GHG emissions - it's inherently the cumulative effect of a lot of small fry contributions.

* Passenger rail is losing market share to cars in Europe and Japan.

True, but that's because people are becoming ever more affluent and therefore travel ever more miles per year. In absolute terms, rail travel is growing and HSR remains hugely popular and commercially successful in both geographies.

* HSR is a mega-project that runs a high risk of cost overruns.

This is why lawmakers added a slew of taxpayer protections to AB3034. The biggest risk isn't raising matching funds, unexpected geology or other factors that you might suspect. It's politicians changing their mind about what they want half-way through the project in response to powerful NIMBYs that didn't get involved early enough.

Construction companies bid low to get the contract and boost profits by charging through the nose for change orders. The trick, therefore, will be to avoid change orders as much as possible. That means project managers must anticipate and defuse resistance from residents near the proposed route by setting realistic expectations and resolving issues as early as possible.

For example, Palo Alto is now considering putting the tracks underground and funding the additional expense by selling the air rights above them to property developers.

Given the scale of the project, it might be a good idea to make the post of chairman of the CHSRA a temporary, directly elected office.

BruceMcF said...

Regarding Rafeal and the "mood in Washington", with the support of the Administration and with the balance of the California delegation behind it, and coming into the first mid-term election, where the party of the President has often been the most vulnerable in the past, I don't see there would be much to worry about in a first tranche of authorization for 2009 and a second tranche in 2010.

Regarding Anony-Mouse and the Cato Institute opposing beneficial public works ... I am SHOCKED that there is gambling taking place in my Casino.

Anonymous said...

While much of the Prop 1A funding will take a little while to have effect, some of it will start stimulating the economy immediately.

CAHSR contains funds for "supporting services", including improvements to the Pacific Surfliner, Metrolink, Caltrain, the Capitol Corridor, and the San Joaquins. This money would go to projects which are ready to start NOW.

Anonymous said...

@ rafael

you write:

For example, Palo Alto is now considering putting the tracks underground and funding the additional expense by selling the air rights above them to property developers.

Given the scale of the project, it might be a good idea to make the post of chairman of the CHSRA a temporary, directly elected office.

Living in the bay area, it is hardly true to say Palo Alto is considering putting its tracks underground.

There was an article written by one person, which caused a lot of comments in a blog --- that is all there is on this right now. The PA City council has not taken up this proposal --- this is all just speculation on the part of an author and some responses. When they get down to economics, they are going to find there is no way they can afford anything like that proposal.

There keeps being mentioned short haul flights and airlines wanting to give them up.

LA to SF is a very heavily traveled air route and it is extremely profitable for the airlines, especially South West. There is no way the airlines want or are willing give it up.

The airlines have not funded any opposition to Prop 1A, because they don't think it can offer any appreciable competition to this route. The CHSRA talks about taking 50% of that route. Well Southwest isn't worried; it just isn't going to happen.

For the same reason the fantasy that 5 new airport runways will have to be built, which would not have to be built if HSR becomes reality is nonsense.

If the population boom that everyone predicts comes to past, there may well have to be built more airport capacity, but it won't be because we didn't build this HSR project, because this HSR project is not going to have any appreciable effect on LA to SF air traffic.

Robert Cruickshank said...

The $2 million has gone to buy Yes on 1A's way onto slate mailers, and to radio ads. $2 million isn't enough to launch a statewide TV blitz.

However, it IS enough to buy time on, say, CNN, MSNBC, the Daily Show tomorrow night. An ad quoting Obama and Biden on HSR would be a HUGE boost for Prop 1A.

Rafael said...

@ anon @ 2:27pm -

that's true, but whether that $950 million acts as an economic stimulus in the state of California depends on how it is spent.

Construction projects such as station upgrades (e.g. raised platforms) will do so. Amtrak has some delapidated cars that could be refurbished by a California company and brought back in to service on Amtrak California routes within months.

Orders for new rolling stock could take much longer to fill because there are few domestic outfits that are set up to deliver FRA-compliant passenger rolling stock. Amtrak California, Metrolink and ACE should migrate to lightweight, fuel-efficient bilevel DMU designs with full driver cabs at either end. Fugly but functional. Perhaps they could be built under license in California.

BART's most recent rolling stock was built by Morrison-Knudsen in Idaho but the new parent company is URS in San Francisco.

Siemens has a light rail manufacturing plant in Sacramento.

Of course, there is also an indirect benefit to investing in commuter and regional rail: even with gasoline prices down, people facing long commutes may prefer to keep riding the trains if that allows them to reduce the number of cars in their family or defer the purchase of a replacement. Perhaps they'll invest in an electric bicycle instead, perhaps even a folding one.

On-board broadband internet service could boost ridership on Amtrak Coast Starlight, Amtrak California routes, ACE and Metrolink as well as Caltrain, which successfully trialed WiMAX technology for its Mockingbird service in 2006 but could not afford to commercialize it. Perhaps BART and NCTD Coaster/Breeze would benefit, too.

Goal #1 should be to reduce the home foreclosure rate, since that stresses family ties, blights asset values in the neighborhood, makes banks less willing to lend and consumers less willing to spend in general.

Btw: HR 2095 mandates the installation of interoperable positive train control equipment on highly trafficked routes by 2015. The bill includes some money to pay for that, but not much. Prop 1A money would be well spent on PTC.

Btw2: prop 1A investments do little good if Sacramento keeps stealing transit operations subsidies to plug holes in the highways budget. Migrating to DMUs would reduce operating and maintenance costs, though.

Rafael said...

@ anon @ 3:08pm -

I did not mean to imply that the city of Palo Alto already has concrete plans to execute the idea I described above. But at least someone is thinking outside the box, which is more than I can say for Menlo Park.

As for the SF-LA corridor, it is the most heavily trafficked in the country, if not the world. However, everyone except Southwest was in dire straits as recently as this summer because of high fuel costs. HSR does compete very effectively against short-haul flights everywhere else in the world, most recently on the Madrid-Barcelona route.

There's no reason why airlines shouldn't increase their profits by making money both off HSR operations as such and by making long-haul flights out of Palmdale easily accessible to Central Valley residents. The technologies are complementary, many European train stations have IATA and ICAO codes so airline booking agents can sell tickets for connecting trains.

nikko pigman said...

Robert, may I suggest writing an editorial to a newspaper focusing on the "cost of not building HSR is not zero" theme? It might make up to some extent for its nonexistence on the ballot and insert this idea into the mainstream media. Its a legitimate and very good argument but its not widely considered.

Spokker said...

So at the end of the day how many lawsuits do you think high speed rail in California will result in? There are two already right?

I think I might be suing them and I'm a supporter. It's going to be the hip new thing to do in California.

"Hey, so did you sue high speed rail yet?"

"Nah, but I will later today."

I think I will try to invalidate a couple of environmental impact reports. I call LA-Riverside!!! No one take mine.

Robert Cruickshank said...

spokker, I think Martin Engel and Morris Brown have dibs on the "omg you can't eminent domain my million dollar houses!" suit.

Seriously, any big project like this attracts lawsuits like moths to a flame. One more reason to get started on this sooner rather than later.

Spokker said...

Robert, this is quite the tenses.

I'm seriously nervous, about this prop, prop 8, and the presidential election.

I feel like a jerk off for caring so much, but all I'm going to do for the next couple of days is find a computer at school and refresh the hell out of election coverage pages.

I'm gonna wear out that F5 button.

njh said...

spokker, if you care so much, would it not be better to be doing something more proactive?

Spokker said...

I didn't mean it that way. I meant that I'm so anxious and interested in what's going on that I won't be able to peel myself away from election day coverage.

I've said before that I will not campaign for anything, at least not in person. Young voters should vote, but they should not campaign. Young voters are not taken seriously because they do not vote in large numbers so when they do campaign, they look foolish. See also: the Kevin Bacon nonsense.

I am one of three people in my department at work that is registered to vote. This is out of about 20 people. My department skews college age and is largely Hispanic. I hope that if young people and minorities are expected to turn out in large numbers, that my experience at work is not the national trend.

Brandon in San Diego said...

Only 3 in 20! oh my goodness

Robert Cruickshank said...

Young voters will turn out in larger numbers than spokker is assuming. But it is an open question whether we will turn out in large enough numbers to sway the outcome on some of the key races here in California, including Prop 1A. I share your tension, spokker - I cannot wait for this to be over.

yes on 1a said...

Everyone that I know that voted early told me that they voted yes on 1a..The field poll calls land lines right? I think they might be wrong about those early numbers
And yes I cant wait till 10pm Nov4